We heard before Christmas that voluntary tax returns won’t be far away as it is one of the key recommendations of the much anticipated Henry Tax Review.
It is proposed that taxpayers will receive a one page summary from the ATO which will show your income together with a standard deduction for necessary work expenses. If you are happy with the ATO’s calculation they you simply tick a box and get your refund. Sounds good in theory for those with basic tax returns and don’t want the hassle of filling out a return.
But does anyone seriously trust that the taxman will look after us? Do you really think the ATO will be Father Christmas when granting refunds?
Of course not.
Just consider the taxpayers who spend alot for work related expenses such as car, study, home office, internet, phone, subscriptions and conferences. They will miss out if they simply accept the standard deduction. We don’t even know what the “standard deduction” is exactly going to be anyway as Dr Henry has hinted it will be based on your income and occupation.
So it is likely to be based on an average for a particular occupation. Which begs the question as to which occupation would have the highest work related expenses claim? I would guess someone in a sales and marketing who receive car allowances and use their own car to see clientele. So why don’t we all become sales and marketing people and get a big deduction as well??
And remember an average is just that an average … people who spend more than the average will miss out whilst those under the average will be happy. Don’t shortchange yourself simply be being lazy as it could cost you thousands.
And what happens with inflation? Does the “standard deduction” increase for inflation? Or does it stay at the same level like a lot of other standard tax figures (eg $300 no receipts figure) have been over the years?
So will accountants lose work as a result of this? Basic preparers such as ITP and H & R Block will lose out but they have lost over 2.2 million in business in the past decade with the introduction of the Tax Pack and E-Tax. It is very unlikely that other qualified accountants will suffer. If a tax return is complex then you will still need help with an accountant – so those returns with business income, rental property or capital gains you won’t get any benefit from the proposed change.
In fact I think my business will make a lot of money by charging a fee if we can find discrepancies in the taxman’s calculations. Perhaps our slogan will be … “We will do your tax for free if we can’t get you back more!”
The last three years the ATO have been trialing a pre-filling report where information such as salary, interest, dividends and managed fund distributions can be downloaded. This will no doubt form the basis of the proposed one page document. But this information is based on the provision of tax file numbers and also the reporting to the ATO by the respective institution. It takes a good four months to get information that is close to accurate but it rarely is 100% accurate. There are missing PAYG Payment Summaries, missing bank accounts, missing shares and the like. I can’t see much improvement in the future.
What do you intend on doing? Will you trust the taxman and accept his verdict or will you still prepare your own tax return as normal?
Monday, January 18, 2010
Is the Taxman becoming Father Christmas? Don't bet on it!
Monday, June 29, 2009
Has the stimulus payment worked?
Debate will no doubt rage for years to come whether the “Kev 07” stimulus package worked for Australia. I must admit that I queried the benefit of it when it was announced on 3 February. I struggle to find the benefit of giving someone $900 if they are at risk of losing their $50,000 job.
The same arguments about the baby bonus & plasma TVs are also being raised about the stimulus payment. Foreigners & the dead got the cash. Yet those that needed the government handout the most seemed to have been the ones that didn’t earn enough as they weren’t technically a “taxpayer”.
There have been complaints, quite justifiable, for some accounting firms charging $60 handling fees. National credit card debt continues to rise with it now around $45 billion. And we had announced in the Federal Budget in May that we have a record budget deficit.
Yes Australia avoided a technical recession when the March GDP figures were released but really what impact did the stimulus payment make to the bottom line. And is it inevitable that we will fall into recession anyway in 6 months time?
National unemployment continues to rise with 1 million expected to be without a job in the next few years.
Business confidence has risen in recent months & I can personally tell you that virtually everyone of my clients were very happy to be getting $900 on 4 February.
So I ask again has the stimulus payment worked? I don’t think we really know the answer to that one.
But what I do know is that the nation’s tax compliance has improved for individuals anyway. About 4 weeks ago, the ATO had estimated that there were approximately 800,000 people (almost 10% of taxpayers) that were eligible for the tax bonus but had yet to lodge their 2008 tax return. 2 weeks ago that figure was 500,000. Last week it dropped by to 280,000 (or $252M in payments!). My office had its busiest June ever as people came out of the woodworks to get their $900. As I told them, if you saw it on the ground you would pick it up ... so why not bend your back.
Since 3 February, there have been over 2.2 million tax returns lodged. This is a 20% increase for the same period in prior years. Over 318,000 returns for prior years have been lodged as well. And there have been alot of real slackos as well. More than 2,000 people have since come clean & lodged 9 or more years of tax returns.
Happy New Financial Year everyone! May the new year bring prosperity to your business & the economy.
Do you think the stimulus payment has worked? Has your business noticed a pick up in activity since 3 February?
